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Technology Stocks : Nextwave Telecom Inc. -- Ignore unavailable to you. Want to Upgrade?

To: JGoren who wrote (185)	11/1/1999 9:12:00 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 1088

Nextel trying very hard to steal NextWave's spectrum. November 1, 1999 Nextel Is Eager to Purchase NextWave Radio Spectrum By KATHY CHEN and NICOLE HARRIS Staff Reporters of THE WALL STREET JOURNAL WASHINGTON -- A lawyer for Nextel Communications Inc. says the wireless-communications company would pay more than $6 billion for radio spectrum that the government auctioned to NextWave Personal Communications Inc. for $4.7 billion in 1996. But a deal is going nowhere because government licenses for the spectrum are tied up in NextWave's bankruptcy proceedings, and federal regulators haven't been able to make an end-run around the court by convincing Congress to let them reclaim the licenses and auction them again immediately. NextWave Personal Communications filed for protection under Chapter 11 of the federal bankruptcy code in June 1998. Its parent, NextWave Telecom Inc., of Hawthorne, N.Y., filed in December 1998. NextWave's problems followed a disastrous auction of radio licenses by the Federal Communications Commission three years ago. The sale fetched a total of $10.2 billion, but eight companies that bid more than they could pay -- including the top three bidders -- filed for protection under U.S. bankruptcy laws. Nextel is prohibited from talking about the matter as part of the proceedings in U.S. Bankruptcy Court for the Southern District of New York. Nextel lawyer Fordham Huffman stated what the company would be willing to pay for the spectrum during an unsuccessful appeal to the court to lift the gag order. "We want to be able to explain to securities analysts ... why we believe offering six-plus billion dollars, your Honor, is reasonable," Mr. Huffman said, according to public records of the Oct. 20 proceedings. Allen Salmasi, NextWave's chairman and chief executive, said "it doesn't matter if [Nextel's] bid is $1 billion or $200 billion. We don't believe their intent is to go through with a transaction with NextWave." The deal would require the FCC to waive a number of regulations, including one that restricts the sale of such spectrum to small companies, and "NextWave's board really can't accept proposals that don't comply with FCC regulations or congressional statutes," he said. Mr. Salmasi said NextWave has proposed a restructuring plan that would allow it to emerge from bankruptcy proceedings and pay the government more than $1 billion to keep the licenses. Based on the prices bid at an FCC auction this spring, that figure is already in excess of the spectrum's worth, he said. Nextel's potential offer is part of a proposed settlement negotiated among Nextel, the FCC and the Justice Department, and hasn't been made public until now. It is higher than either the $4.7 billion that NextWave originally bid for the licenses, or the $2.1 billion that Nextel has been widely believed to be offering. And it is significantly higher than the $1.02 billion at which the bankruptcy court has valued the spectrum. The proposed deal would be good for both Nextel and the FCC. Since NextWave's successful bid, wireless radio spectrum has increased in value as the number of cellular-phone users continues to grow and the possibility of widespread wireless access to the Internet moves closer to reality. In an August report, Lehman Brothers Inc. analyst John Bensche valued the NextWave licenses at $5.5 billion. Nextel has said it intends to use the spectrum to further build its national wireless network. Unlike telecommunications giants such as AT&T Corp. and Sprint Corp., which bought standardized licenses to form national networks, Nextel, Reston, Va., cobbled together mom-and-pop radio dispatch licenses across the country. "All of Nextel's competitors have twice as much wireless spectrum as they do," Mr. Bensche said. "Going forward, they're going to need to bulk up with more spectrum." A Nextel spokesman said the company has sufficient spectrum for its current business plan. For the FCC, the settlement plan would open a way to quickly free up spectrum for new technologies. At the same time, it would ensure that the government receives what regulators view as fair compensation for the licenses, although part of the more than $6 billion would go toward paying creditors and NextWave equity. The plan would need to receive the green light from the bankruptcy court, which also would consider NextWave's restructuring plan. In addition, it would require approval, and the granting of a number of waivers, by a majority of the FCC's five commissioners. But the bankruptcy court disputed what the spectrum licenses are really worth. Under the court's valuation, NextWave could keep the licenses by paying the government only $524 million on top of the $499 million down payment it had made earlier. The FCC has appealed the bankruptcy court's valuation decision, and the Second Circuit Court of Appeals in New York is scheduled to hear opening arguments on the matter Monday. While the appeals court won't rule on an appropriate value for the spectrum, it will decide whether the bankruptcy court has authority to renegotiate the terms of licenses, or if only the FCC may do so. In October, the FCC failed to persuade Congress to approve legislation that would have allowed the agency to reclaim telecommunications licenses tied up in bankruptcy proceedings and to reauction them. Supporters of the plan may try again before Congress adjourns later this month. Copyright ¸ 1999 Dow Jones & Company, Inc. All Rights Reserved.